Investors Wipe Out Wang Chuanfu's $1.8 Billion Wealth due to Apprehensions about Electric Vehicle Pricing Competition
Billionaire Co-founder of BYD, Wang Chuanfu, Sees $1.8 Billion Wealth Drop over Discounted EV Models
Chinese electric vehicle company BYD, co-founded by billionaire Wang Chuanfu, suffered a $1.8 billion dip in Wang's personal fortune following a market-wide sell-off triggered by the firm's announcement of steep discounts on its entry-level models.
The 59-year-old chairman and CEO, who retains a substantial stake in BYD, still holds an estimated wealth of $28.3 billion. However, his company's dual-listed shares plummeted by 9.2% in Hong Kong and 6.2% in Shenzhen on Monday.
By offering as much as a 34% discount on 22 pure electric and plug-in hybrid models, available until the end of June, BYD aims to attract price-sensitive consumers. The Seal 07 DM-i, a hybrid sedan with assisted driving features, saw a price reduction of 53,000 yuan (approximately $7,400), or 34%, dropping its price to 102,800 yuan. The Song Plus EV, meanwhile, now sells for 117,800 yuan, a reduction of more than 20% after price cuts.
Although BYD has previously utilized price cuts to propel car sales, its recent moves have fueled concerns about a deeper price war in the Chinese automotive market, say analysts. Since BYD's shares surge over 60% in Hong Kong this year, investors are seeking to profit now and escape the potential impact of the price cuts, according to Ke Yan, head of research at DZT Research.
In a bid to boost sales, BYD has deployed more aggressive discounts and self-driving functions on budget-friendly models. However, according to Yale Zhang, managing director of consultancy Automotive Foresight, this strategy might not have yielded the expected results, as indicated by the company's February attempt to increase deliveries by adding self-driving features to models priced below $10,000.
A recent fatal crash involving a Xiaomi electric vehicle has stoked concerns about smart driving software, but BYD may be counting on direct price cuts to bolster sales in its home market, China. The company aims to deliver 5.5 million vehicles globally by 2025.
Analysts contend that other automakers may have no choice but to respond in kind due to the heightened competition. As a result, shares in Geely Automobile and Great Wall Motor experienced noticeable dips, with Geely's stock plunging over 8% in Hong Kong and Great Wall Motor's share price falling more than 5%.
The Chinese electric vehicle market is embroiled in a significant price war, with key players like BYD and Geely resorting to aggressive price cuts as a means of maintaining market share and spurring demand in a highly competitive landscape. As the largest automotive market globally, China boasts nearly half of all new car sales, with both fully electric and plug-in hybrid vehicles accounting for a substantial portion of these sales.
The competitive nature of the Chinese market, combined with economic challenges and the impending extinction of government incentives, compels manufacturers to offer competitive pricing to attract consumers. Although these price cuts may bolster short-term sales, they pose significant risks to profitability and market dynamics in the long term.
In light of the ongoing price war and the potential for increased competition, global players such as Tesla could face a more competitive landscape if Chinese manufacturers expand their international presence with competitively priced models.
Wang Chuanfu, the billionaire co-founder of BYD, is facing challenges in the finance and business sectors due to the company's discounted EV models. The price reductions, aimed at attracting price-sensitive consumers, have sparked concerns about a deeper price war in China's technology-driven automotive market.
BYD's aggressive pricing strategies and deployment of self-driving functions on budget-friendly models may induce other automakers to respond with similar tactics, potentially intensifying competition in the global market, especially in China, which is the largest automotive market globally.
